Monthly Strategy Update: Emerging Markets Equity with ESG exclusion

Links to the other Candoris Monthlies:

DSM US, Global, EME Growth         SIM US High Yield        Coho ESG US LC        PAM Senior Loans        VanEck EMD

 

Good afternoon *|FNAME|*,

In August the VanEck EM growth strategy outperformed the benchmark again with 1.89% gross of fees.
YTD the VanEck EME strategy already has an outperformance of 15.01% (USD and gross of fees)!

The VanEck EME strategy stays true to style as always, sometimes this results in a period of underperformance like in 2018, but more often in outperformance like 2019 so far (outperformance of + 15.01%, VanEck +18.46% vs +3.45% for the MSCI EM IMI benchmark gross of fees!).

Over the long run the philosophy and process (see below) works, as the strategy outperforms its benchmark with 4.12% annualized over the last 10 years (till end of August 2019 gross of fees).


 

Information



- Presentation VanEck EME

- VanEck EME versus peers

- EME outlook presentation

- Factsheet

- Commentary

- Kiid's

-
EME outlook presentation
 

 

Outlook

In a world where we are revising down expectations of global growth, substantial headline risk remains. We expect the tug of war between lower global rates and lower global growth to continue, and highlight the potential risks emanating from protracted trade and tech wars between the U.S. and China.  Political expediency and the cost impact on both sides would argue for some resolution on the trade front, but how you resolve the technology part is much more challenging. It seems to us that there is a complete lack of trust and that supply chains may inevitably bifurcate.

We continue to believe that the most probable scenario for the U.S. dollar going forward is flat to drifting lower, as the U.S. economy becomes less exceptional than it has been compared to other developed and emerging economies, and as headlines begin to focus more on the large twin deficits. A stable to weaker U.S. dollar tends to be good for emerging markets.

On a micro level, we are still seeing both healthy free cash flow and balance sheets. Valuations generally in emerging markets are  on the cheap side. Small-cap valuations, however, are at multi-year lows and well below relative (compared to large-caps) and absolute long-term averages. In our view, today’s companies are both healthier andbettercompared to the past decade: they are more private, entrepreneurial and less state owned. We believe they ought to be more expensive than they have been in the past. While capital expenditure may be low, companies continue to find it hard to return capital to shareholders. We do however believe the time will come.

The VanEck Emerging Markets Equity Strategy identifies companies with a structural growth at a reasonable price (“S GARP”). Persistent long-term structural growth opportunities exist in emerging markets. These opportunities are poorly captured by widely used benchmark indices. High growth is frequently overvalued and value stocks often remain cheap. Therefore, we believe achieving strong returns in emerging markets requires an experienced team using a disciplined approach to uncover structural growth at a reasonable price.

Please let me know if you like to learn more about the strategy: florian.bankeman@candoris.nl

 

Please click here for the complete Q2 performance review and outlook

 

Historical Market Capitalization Allocation - %

 

 

 

Since inception in 2006 the VanEck EME has had a higher upside market capture leading to an annualized outperformance of 2.69%(End of August, USD and gross of fees)

 

 

 

VanEck Emerging Market Equity Composite data                     VanEck EM Equity Fund Facts

Alpha

2.14

 

 

 

ISIN

IE00BYXQSM04

Beta

1.08

 

 

 

Benchmark

MSCI EM IMI

Std Dev

24.39

 

 

 

Bloombergticker

VEMKUI2

UMC

110.76

 

 

 

Currency

USD

DMC

101.38

 

 

 

Asset Class

Equity

Information Ratio

0.31

 

 

 

Region

Emerging Markets

Tracking Error

6.92

 

 

 

Dividend policy

Accumulating

Sharpe Ratio

0.28

 

 

 

 

 

 

Active Share

85.08%

as of 30-6-2019

 

 

 

 

Data as of 31-7-2019 source eVestment

 

Strategy overviewkey features of the fund

Investment Philosophy

VanEck believes in structural growth at a reasonable price, as High growth is frequently overvalued and value stocks often remain cheap.
 

Structural growth
Structural trends in company, sector, and country fundamentals:

  • Persistent, visible, and self-sustaining growth
  • Structural growth can be stock-specific or thematic, and can be driven by sustainable advantage, which is often company management
  • Deemphasizes cyclicality, opportunism, and inefficiency

Growth at a reasonable price (GARP)
The intersection of growth and value investing:

  • Avoids overpaying for obvious expressions of growth where valuations can be elevated, driven by opportunistic foreign investors and momentum driven domestic investors.
  • Avoids value traps that may be found in state-owned companies where significant obstacles inhibit the realization of value in emerging markets due to ownership constraints

Investment Process



Please
click here for a more detailed presentation about the Emerging Markets Equity strategy.

 

 

The VanEck Emerging Markets Equity Strategy identifies companies with a structural growth at a reasonable price (“S GARP”). Persistent long-term structural growth opportunities exist in emerging markets. These opportunities are poorly captured by widely used benchmark indices. High growth is frequently overvalued and value stocks often remain cheap. Therefore, we believe achieving strong returns in emerging markets requires an experienced team using a disciplined approach to uncover structural growth at a reasonable price.

 

Links to updated presentation and other documentation

Click to receive the information

- Presentation VanEck Emerging Markets Equity
- VanEck Emerging Markets Equity versus peers
- Factsheet
- Commentary
- Kiid's

 

* Performances are annualised. The latest data is still preliminary. Data quoted is past performance and current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate.. "This email is intended to be reviewed by only the intended recipient and may contain information that is privileged and/or confidential. If you are not the intended recipient, you are hereby notified that any review, use, dissemination, disclosure or copying of this email and its attachments, if any, is strictly prohibited. If you have received this email in error, please immediately notify the sender by return email and delete this email from your system."
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